Elizabeth Holmes, the former CEO of the failed blood-testing business Theranos, will be sentenced on Friday, ten months after a jury found her guilty of cheating investors.
In 2003, 38-year-old Holmes established Theranos, which swiftly developed to become one of the most well-known startups in the world, reaching a peak worth of $10 billion. However, a succession of Wall Street Journal articles raised questions about the effectiveness of the company’s technology and business methods, prompting various federal and state probes.
Judge Edward Davila of the Northern District of California will administer the term, which will serve as a signal of the severity of punishment for wrongdoers in the high-flying world of tech companies who misrepresent a company’s capabilities.
Carrie Cohen, worldwide co-chair of the Investigations and white-collar defense practice group at law firm Morrison Foerster, stated: “Especially in a highly publicized case, you want the public to know that if you mislead investors or anyone else, you’re looking at substantial jail time.”
“Given the facts that were revealed at trial, I anticipate she will receive a large jail sentence, perhaps closer to what the government requested,” Cohen said.
Holmes was found guilty on four charges of investment fraud and conspiracy in January. Four other counts of hurting patients who used Theranos’ blood-testing equipment were acquitted, and the jury could not reach a verdict on the remaining allegations. The failure of Theranos caused investors, including media mogul Rupert Murdoch and software tycoon Larry Ellison, to lose $144 million.
Federal prosecutors have requested a 15-year prison term and a $800 million fine for Holmes, describing his misdeeds as “among the most significant white-collar felonies in Silicon Valley or any other District,” according to court documents filed this week.
On Thursday, September 1, 2022, Elizabeth Holmes, creator of Theranos, exits federal court in San Jose, California. Bloomberg
Holmes’ attorneys have recommended that she receive no prison time, stating that she does not constitute a threat to society, is likely unable to repay her debt, and has already endured “dehumanizingly brutal” media coverage of Theranos’ demise. They submitted 130 testimonials from friends, family, and even Senator Cory Booker attesting to Holmes’ attentiveness.
Holmes, who has a one-year-old kid, seemed pregnant at her most recent court appearance. Cohen stated that both considerations could influence the judge to be lenient during sentencing.
Holmes claimed that she was psychologically damaged after being raped in college and that she endured sexual and emotional abuse at the hands of former Theranos COO Sunny Balwani, who was 19 years her senior. During their tenure as co-founders of Theranos, Holmes said that Balwani controlled her schedule, food, and public appearance, and constantly belittled and criticized her.
Attorneys for Balwani have refuted the allegations. In July, he was found guilty of 12 charges of fraud, and his sentencing is due for December 7.
Holmes has indicated that she will appeal her verdict. If she is sentenced to prison, the timing of her incarceration could be a point of contention. The judge could delay the beginning of Holmes’s term until after her delivery. Cohen stated that she could also post bail to remain free while she appeals her sentence.